Is there a need for additional nursing home care for the elderly? ThatÌs not clear. For every elderly person in a nursing home, two otherÛequally disabledÛelderly people are not. This situation reflects the fact that, when people are forced to pay with their own money, many find cheaper options. Nursing home care costs about $25,000 a year, in part owing to government regulations that require most nursing homes to be structurally safer than the average Hilton hotel. For the most part, Medicaid patients in nursing homes cannot take the money spent on their behalf and try to find the same care for a lower price. As with other parts of the health care sector, the system is not designed to help patients find a good deal for a reasonable price. Rather, it is designed to funnel billions of dollars into nursing homes.

There is very little private insurance for nursing home care. And many policies that look like insurance on the surface are actually disguised savings plans. One reason is that it is extremely difficult to construct objective definitions of the circumstance under which nursing home care is indicated. Entry into a nursing home requires a physicianÌs statement that the treatment is necessary, but physicians often base their judgments, not on the patientÌs medical condition, but on family preferences. Nursing home care very often is a choice about living arrangements rather than a medical necessity. Another reason for the lack of long-term care insurance is federal tax policy, which creates tax subsidies for health insurance for current medical expenses but disallows tax deductions for premiums for future medical expenses. Savings or insurance premiums for future medical expenses must be paid with aftertax dollars.

There is no question that if nursing home care were provided free to the elderly, the demand would soar. Some estimate the additional cost at $60 billion a year, but it could be much higher. If every elderly person spent one year in a nursing home, the total cost would be about $627 billion per year.

The Clinton administration wants to repeal a new law which makes it a federal crime for individuals to dispose of their assets in order to qualify for Medicaid coverage of nursing home expenses. Officials claim that such abuses were not common; however,

• Medicaid helps pay the bill for two-thirds of the 1.6 million people in U. S. nursing homes.

• Individual costs for nursing home care often exceed $100 a day and can exhaust patients' assets -- since long-term care isn't covered by Medicare.

• Although the law making it a crime to dispose of assets took effect on January 1, 1997, the administrator of the Federal Health Care Financing Administration said his agency won't press states to enforce the new restrictions.

Under the law, a person who "knowingly and willfully disposes of assets" in order to become eligible for Medicaid may be fined $10,000 and imprisoned for one year. In general, a person will not be subject to criminal penalties if he or she gives away assets more than three years before applying for Medicaid.

Source: Robert Pear, "Repeal Urged for Law on Giving Away Assets," New York Times, February 18, 1997.

INSURANCE AVAILABLE FOR LONG TERM CARE

The cost of long-term care is the principal reason for poverty among the elderly, reports the American Health Care Association, a group of nursing home care providers. An AHCA study points out that insurance is available for nursing and home health care, but many people fail to insure against the need.

• Yet two out of five Americans will need nursing home care at some point in their lives, and one in five Americans over age 50 is at risk of needing such care during the next 12 months.

• A full 55 percent of those who enter nursing homes will stay at least one year, and 21 percent will remain five years or longer.

• Nursing home care is cheap compared to the cost of a hospital stay -- an average of $105 a day versus $900 in 1993.

• But the average American man can expect to spend $56,895 on long term care; while the average woman will spend $124,370.

Many people mistakenly assume Medicare or their health insurance plans will pay for long term care. But Medicare pays only for limited nursing home stays after hospitalizations and requires a substantial copayment.

Two out of three nursing home residents, about one million people, now rely on Medicaid to pay for their care. However, in order to qualify for Medicaid, patients must first spend themselves into poverty, and then the benefit per day is limited. Instead, elderly Americans are increasingly purchasing long-term care insurance.

• By the end of 1994, more than 3.8 million people had purchased long-term care policies, and 1,028 employers offered such insurance plans to their employers.

• A 1995 study found that 61 percent of long-term care insurance purchasers have annual incomes of less than $35,000 and about one-third have assets valued at less than $30,000.

• Typically, policies purchased by people age 65 pay an average $86 daily nursing home benefits and $80 daily home care benefit, cover 5.1 years and cost an average of $93 per month.

Source: "Long Term Care Insurance: Debunking the Myths," Background, July 17, 1996, American Health Care Association.

For the full text of the NCPA Brief Analysis on Nursing Home Care go to http://www.ncpa.org/ba/ba190.html

MEDICARE PAYING FOR LONG-TERM HOME CARE

Home health care, primarily home visits by nurses and health aides, is one of the fastest-growing categories of Medicare expenditures. While home visits were intended to ease the transition from hospital care, it is most frequently used as a form of long-term care for chronic conditions, according to a new study.

By examining Medicare claims data for 1993, researchers determined that:

• Roughly three million Medicare enrollees received more than 160 million home health care visits in 1993.

• About 35 percent of the visits occurred more than a month after hospital discharge and 43 percent were not associated with any inpatient care during the previous six months.

• The visits were most frequently for long-term care, with 61 percent of the visits to enrollees who received home health care for six months or more, and 30 percent of the recipients receiving more than 50 visits each.

The researchers found no evidence that home health care was substituted for hospital care. For instance, those urban areas with higher rates of home health care did not have fewer hospital admissions or shorter lengths of stay. However, other evidence suggests that home care may lower hospital costs for severely disabled veterans and elderly patients with congestive heart failure.

Medicare reimbursements for home health care grew from $2 billion in 1988 to $12.7 billion in 1994 and now account for more than 8 percent of Medicare's total budget. This growth was mostly the result of more liberal rules and standardized coverage for home care in 1988 and 1989. Medicare does not cover long-term institutional care, such as in nursing homes, but Medicaid and some private insurers do.

Source: H. Gilbert Welch et al., "The Use of Medicare Home Health Care Services," New England Journal of Medicine, August 1, 1996.

GIVING AWAY MONEY TO GET MEDICAID

In this year's health insurance reform bill, Congress clamped down on the practice some elderly people had engaged in of giving away their savings to relatives so they could qualify for Medicaid. That will become a crime as of January 1st.

• Although some lawyers and advocates for the elderly contend the law is vague and unenforceable, the maximum penalty is a year in jail and a $10,000 fine; attorneys, financial planners and accountants who help in the transfer might also be liable.

• To qualify for Medicaid, a single person can have no more than $2,000 in assets -- excluding homes, household goods, and perhaps cars.

• The spouse of someone in a nursing home can retain about $77,000.

• Transferring assets is permitted to support a spouse or dependent child.

Nevertheless, some are advocating doing away with the law. Others advise seniors to plan ahead by buying long-term care insurance rather than depending on Medicaid. The average price of a basic policy that pays $100 a day for four years is $400 a year for a 50-year-old, $1,100 for a 65-year-old and $4,500 for a 79-year-old.

Source: Anne Willette, "Law Puts Twist Into Medicaid Disability," USA Today, November 25, 1996.